Australia’s Long-Held Stake in Timor-Leste’s Oil

Few political matters could claim to be more incendiary than Australia’s actions in the Timor Sea over recent decades. The media emphasis on the maritime boundary dispute over access to oil and gas reserves in the Timor Sea has led to a commonly held view that Australian oil interests began there during the first sea boundary negotiations in the 1970s.

This is not the case. Australia’s interests date back much further than is commonly realised. In fact, Australia has held a stake in Timor-Leste’s oil for well over a century.

Unsurprisingly, given the close proximity of the two nations, Australian policy makers continue to place great emphasis on Timor-Leste as vital to protecting Australia’s northern approaches—a point made abundantly clear in all three defence white papers published this century (previous white papers referred to Indonesia, which included modern day Timor-Leste). Just as Timor-Leste continues to do today, Portuguese Timor, as it was then known, loomed large in Australian geo-political strategy prior to the Pacific War. The colony’s oil played a central role.

The origins of Australian interest in Timor-Leste

The origins of Australian interest in Timor-Leste date back to 1902 when the first onshore oil concessions were granted to a private Sydney syndicate. At the same time, the rise of German naval power in the late nineteenth century had brought the strategic significance of Portuguese Timor to the fore within Australian political circles at a time when oil was the emerging naval fuel technology. Rumours of German intentions to build a coaling station at Dili with a view to eventual acquisition of the colony caused anxiety, for a German territory so close to Australian shores would threaten Australian interests in the region.

Australian occupation of German New Guinea in August 1914 provided little comfort with respect to the Portuguese colony. Japan had risen as a power after defeating Russia in the Russo-Japanese War of 1904-05, and began to eye the oil fields in Portuguese Timor during the war. Despite being an ally at the time, Japan emerged as the primary threat to Australian security—a threat that would endure for the large part of half a century.

A stepping stone towards Australia

With a fading Portuguese Empire whose colonies were considered derelict, Portuguese Timor was viewed as something of a weak spot among Australia’s near neighbours. Centuries of colonial rule had left the colony largely undeveloped. For Australia’s leaders, so long as Portuguese Timor remained under the control of neutral Portugal, the threat of its annexation by Japan was ever present. In light of this, the Australian government had hoped for the incorporation of Portuguese Timor into the British Empire, although it was not to be.

According to Australia’s leaders, the next best measure to counter Japanese penetration of the colony was to ensure that the oil concessions in Portuguese Timor remained in Australian hands throughout the 1920s and 1930s.

Within the context of the wider international crisis of the 1930s, Japan’s increased aggression in China and south-east Asia fuelled Australian fears about the course of Japanese policy—fears that were exacerbated even further by the weakened state of the Royal Navy as a result of having pursued a policy of naval disarmament after the First World War. Japan’s naval strength increased while that of Great Britain diminished.

While Japan cemented itself as the dominant power in Asia through naval armament, Australia relied on Great Britain to send a fleet to the Singapore Naval Base in the event of hostilities. This was problematic for Australia’s leaders. Should a European war break out—a situation becoming increasingly more likely—the Royal Navy would become embroiled in Europe. Australia would be left defenceless against a southward-gazing Japan.

By 1936, after having secured footholds throughout the wider Pacific through its southward advancement policy, culminating in 1940 as the Greater East Asia Co-Prosperity Sphere, Japan sought to position itself in Portuguese Timor through securing the oil concessions.

In 1937, the British Consul-General in Batavia Henry Fitzmaurice summed up the fear in relation to Japanese designs in Portuguese Timor, referring to it as “a stepping stone towards a goal farther south”.

The above political cartoon depicts a Japanese soldier moving his way down Indochina, pointing his gaze toward Southeast Asia with Portuguese Timor marking the final stepping stone towards northern Australia.

The matter played out at the highest levels of government with Joseph Lyons, Robert Menzies, Stanley Bruce and W.M. Hughes all involved in the secret diplomatic negotiations with Great Britain, Portugal and Holland, taking various measures to ensure the Japanese were unable to gain a foothold in Portuguese Timor through securing the oil concessions.

Meanwhile the Japanese South Seas Development Company, the vehicle through which Japan was executing its southward advancement policy (backed by the Japanese Imperial Navy), had obtained shares in the major Portuguese agricultural concern operating in the colony during the 1930s. Despite not having majority share ownership, it controlled the company’s dealings. The company secured the coffee crops; the colony’s most abundant commodity, as well as other agricultural concessions.

While they opposed Japanese penetration, the Portuguese local authorities grew to rely on this investment. The impoverished state of the colony had made it vulnerable to Japan’s policy of economic aggression. Japan was able to gather intelligence along with a detailed knowledge of the colony, benefiting its subsequent occupation of Portuguese Timor during the Pacific War.

The developments in Portuguese Timor over the first half of the century resonate with current issues, only now it is China’s growing influence in Timor-Leste that is keeping some Australian politicians awake at night. For example, in June this year, National MP George Christensen echoed the sentiments of Australia’s interwar leaders in parliament:

“China’s investment in countries like Vanuatu, Papua New Guinea and East Timor sets up debt traps for those countries, which they will only be able to service by giving up land or ports where future Chinese military bases can be established. These are countries right on our doorstep”.

Australia’s involvement in Portuguese Timor also laid the foundation for continued Australian interest in the oil reserves, resulting in a major maritime boundary dispute that has led to the recent charges brought against Witness K and lawyer Bernard Collaery for their roles in revealing the bugging of Timor-Leste’s cabinet.

As Australian policy makers continue to attach great strategic importance to Timor-Leste, and the recent history of Australia’s oil interests attracts considerable interest, it is vital that future decisions by Australian policy makers are informed by a proper understanding of the history of Australian-Timor-Leste relations.

*Kathryn Avery is a PhD candidate at the Collaborative Research Centre in Australian History at Federation University Australia. Her PhD project is a foreign policy study focusing on the Australian Government’s concerns over Japanese intentions in Portuguese Timor prior to the outbreak of the Pacific War. Kat’s broad research interest is Australian foreign policy history, with a particular focus on Australian-British and Australian-Japanese relations. Email: k.avery@federation.edu.au. Twitter: @KattaAvery